Nvidia: Not Enough Money in a PS4 GPU for us to bother

[blackened23]

heir console even if the fault was something else as Microsoft would give the consumer a refurbished unit) costing them...1.5billion? Something stupid.

Nintendo laughed it's way to the bank.

Don't think they're laughing anymore with the lack of WiiU sales.

 

[VulgarDisplay]

Don't think they're laughing anymore with the lack of WiiU sales.

People learned their lesson with the original Wii. Nintendo sold a lot of dust collecting paper weights to people that sit on their TV stand not being used because there were never any games for it.

 

[gorobei]

not to get back to the topic or anything...

xbitlab article on analyst predictions on next gen profits for amd
http://www.xbitlabs.com/news/multim...to_Hit_Around_5_Million_in_Total_in_2013.html
original barrons blurb
http://blogs.barrons.com/techtrader...uy-bad-pc-market-notwithstanding/?mod=BOLBlog

excerpt for those too lazy to actually read the articles

Our Japan Sony/gaming analysts Damian Thong and David Gibson believe both the Playstation 4 and Xbox 720 will begin shipping in 4Q13. While our checks indicate Sony‘s Playstation could begin shipping as soon as August, our base assumption (in line with our Japan colleagues) is 2.5 million Playstation 4 units and 2.3 million Xbox 720 units shipped in Q4 With AMD chips confirmed in the Playstation 4 and our expectation for a win in the X-Box 720 we have included the new business in our bottoms-up forecast. We note the business model should be different from AMD‘s existing Xbox 360 and Nintendo Wii U wins which were unit-royalty bearing agreements as opposed to selling finished chips. The processor used in the Playstation 4 is an eight-core CPU, based on the company‘s new architecture ( ̳Jaguar‘), integrated with an AMD graphics chip. We estimate that average selling prices for the company‘s game console business are roughly $60 due to its premium specifications. As a result, we are adding roughly $96 million of Sony/Xbox console chip revenue for AMD in 3Q13 and $228 million in 4Q13, and raising our CY13 and CY14 revenue estimates.

since this is an estimate, the $60/apu price cant be taken as confirmed fact, but it is one sample point of data.

 

[Imouto]

Don't think they're laughing anymore with the lack of WiiU sales.

They can laugh all they want with the 3DS selling like hotcakes. In fact it's the only company that can screw things up forever and its portable market would make up for it. Saved it twice with both N64 and Cube.

 

[BladeVenom]

They can laugh all they want with the 3DS selling like hotcakes. In fact it's the only company that can screw things up forever and its portable market would make up for it. Saved it twice with both N64 and Cube.

Nintendo lost money last year, $460 million. 3DS is still not selling as well as DS did. With everyone now buying smartphones and tablets, expect handheld sales to continue to decline.

 

[Imouto]

Nintendo lost money last year. 3DS is still not selling as well as DS did. With everyone now buying smartphones and tablets, expect handheld sales to continue to decline.

What I'm trying to say is the utter despair they would be into without their mobile gaming market. The 3DS is a super-seller, dunno the figures for the rest of the world but it doubles the amount of hardware and software sold by all the other systems combined in Japan.

 

[alcoholbob]

I really don't buy into these cost estimates that sprout up around these device launches, and particularly this one.

It's comparing to RETAIL cost, when really what matters is wholesale cost.

If the PS3 retailed for $599, it was likely at wholesale cost to retail stores for about $299 (50% typical markup, or maybe $350 or $400 if Sony really leveraged their relationships)

If Sony was using a distributor then they likely sold to the distributor at 20% less than that.

So really their loss on each unit would have been ENORMOUS

However I think it's much more likely they were selling at a much less loss, and the COG estimates are just bogus. So much of those numbers are dependent on volume, and that's the hardest thing to gauge for these types of estimations.

However it can be expected for a console launch of the magnitude of the PS3, Sony will have been buying these components in LARGE volume.

I particularly don't buy the $125 Blu-ray drive, since that is Sony's own technology, and they aren't going to charge themselves a licensing fee.

A lot of time I see these COGs estimates they are more inline with consumer retail prices than the high volume OEM prices the manufacturer is paying.

Like the power supply costing $37, that would mean that if that power supply would be sold retail it would have to cost $100, doesn't seem realistic that it would cost Sony that much to make their own power supply. There's other hilarious line items like "Other components and manufacturing" listed for $148! I think a little more granularity would be useful there!

There's also so much untold story in this (and most) BOM estimates I see, which is the way all the accounting is done. What does the "manufacturing cost" include? What about handling, distribution, overhead? There's so many layers to understanding profitability.

I actually worked in retail for a bit a couple years ago and management was telling me that in retail, you make almost nothing in hardware sales. All the money comes from selling games, controllers, or extended warranties. Our store (a major chain) only makes $6 for selling an xbox 360 from the bulk cost we were getting per unit from our distributor.

 

[blastingcap]

I actually worked in retail for a bit a couple years ago and management was telling me that in retail, you make almost nothing in hardware sales. All the money comes from selling games, controllers, or extended warranties. Our store (a major chain) only makes $6 for selling an xbox 360 from the bulk cost we were getting per unit from our distributor.

Consumer electronics tends to have much lower markups, more like 15-20% so I think you are right and that guy saying 50% markups is... less right.

 

[Arkaign]

Nintendo lost money last year, $460 million. 3DS is still not selling as well as DS did. With everyone now buying smartphones and tablets, expect handheld sales to continue to decline.

I think that's essentially correct for the US market. Japan and to some extent Europe seem different. I think it's a shame personally, phone/tablet gaming is horrendously terrible. I'd rather play on an ancient Gameboy Advance than an iPhone5 or Galaxy S3. Touch just utterly sucks ass for anything beyond Angry Birds and Fruit Ninja.

 

[badb0y]

I think that's essentially correct for the US market. Japan and to some extent Europe seem different. I think it's a shame personally, phone/tablet gaming is horrendously terrible. I'd rather play on an ancient Gameboy Advance than an iPhone5 or Galaxy S3. Touch just utterly sucks ass for anything beyond Angry Birds and Fruit Ninja.

I played and beat Metroid Fusion on my HTC One X, the controls worked surprisingly well considering I was using a touch screen.

 

[jiffylube1024]

I really don't buy into these cost estimates that sprout up around these device launches, and particularly this one.

It's comparing to RETAIL cost, when really what matters is wholesale cost.

If the PS3 retailed for $599, it was likely at wholesale cost to retail stores for about $299 (50% typical markup, or maybe $350 or $400 if Sony really leveraged their relationships)

If Sony was using a distributor then they likely sold to the distributor at 20% less than that.

So really their loss on each unit would have been ENORMOUS

However I think it's much more likely they were selling at a much less loss, and the COG estimates are just bogus. So much of those numbers are dependent on volume, and that's the hardest thing to gauge for these types of estimations.

However it can be expected for a console launch of the magnitude of the PS3, Sony will have been buying these components in LARGE volume.

I particularly don't buy the $125 Blu-ray drive, since that is Sony's own technology, and they aren't going to charge themselves a licensing fee.

A lot of time I see these COGs estimates they are more inline with consumer retail prices than the high volume OEM prices the manufacturer is paying.

Like the power supply costing $37, that would mean that if that power supply would be sold retail it would have to cost $100, doesn't seem realistic that it would cost Sony that much to make their own power supply. There's other hilarious line items like "Other components and manufacturing" listed for $148! I think a little more granularity would be useful there!

There's also so much untold story in this (and most) BOM estimates I see, which is the way all the accounting is done. What does the "manufacturing cost" include? What about handling, distribution, overhead? There's so many layers to understanding profitability.

What is easier to determine is the GROSS MARGIN, and that should not be confused with the overall profitability. It's also why we can't trust these ex-engineers extrapolating and saying the company is losing X billions of dollars, because unless they were a Finance executive they likely don't understand the true costs and profitability, how things are being amortized, etc.

These same gripes I have apply to the iPhone BOM estimates and many others. Take them with a grain of salt!

Sony's losses on the PS3 were huge initially. Were you not around then? They lost over a billion dollars in the first year of the ps3, and that didn't even include the billion in R&D for the Cell CPU:

http://www.guardian.co.uk/technology/blog/2007/oct/26/playstation3lossesnowover

That's how Sony did business in the ps2/ps3 era - have a 5+ year plan, start to turn a profit after ~2 years on hardware and continually make cash on software over the life of the device.

Because Sony took such a beating on the ps3, and it ultimately had lifetime sales well under the ps2, they decided to go with a much cheaper to produce system for the ps4.

--------

These supply price lists are usually pretty reliable. Only Apple routinely has 50% profit margins in the te h industry (though other phone companies like Samsung are making boatloads of cash on rip subsidized $600 phones as well).

 

[VulgarDisplay]

not to get back to the topic or anything...

xbitlab article on analyst predictions on next gen profits for amd
http://www.xbitlabs.com/news/multim...to_Hit_Around_5_Million_in_Total_in_2013.html
original barrons blurb
http://blogs.barrons.com/techtrader...uy-bad-pc-market-notwithstanding/?mod=BOLBlog

excerpt for those too lazy to actually read the articles

since this is an estimate, the $60/apu price cant be taken as confirmed fact, but it is one sample point of data.

So over the next 6-10 years if this console generation sells rougly 140 million consoles (wikipedia *barf* says xbox and ps3 have both sold around 70 million) AMD can make around 8.4 billion from microsoft/sony less what they spent buying the chips. Anyone care to guess how much that many chips would cost? I imagine they would get more profit per chip as time goes on and manufacturing on that process gets cheaper.

 

[BallaTheFeared]

$60 seems insanely low, I find it hard to believe they're doing an eight core cpu and a 7850 level gpu on the same die for $60 cost let alone selling it for $60.

I thought I read Sony teamed up with AMD for the R&D, which would most likely mean less cost to develop for AMD, and less profit per chip since Sony would have shared some of the risk and upfront cost.

 

[AnandThenMan]

I thought I read Sony teamed up with AMD for the R&D, which would most likely mean less cost to develop for AMD, and less profit per chip since Sony would have shared some of the risk and upfront cost.

Where did you read that? And what could Sony have to say about an x86 APU, Sony knows nothing about such a device and AMD knows everything about it.

 

[BallaTheFeared]

I don't know /\

Sony could have invested money, which AMD is short on. It's a custom APU, not like what they've been making it has a DDR5 memory controller and a shared memory pool.

I just thought I read somewhere they did, doesn't really matter just something that was in my brain. $60 still strikes me as grossly under priced, perhaps that's the profit side of it.

 

[ShintaiDK]

$60 seems insanely low, I find it hard to believe they're doing an eight core cpu and a 7850 level gpu on the same die for $60 cost let alone selling it for $60.

I thought I read Sony teamed up with AMD for the R&D, which would most likely mean less cost to develop for AMD, and less profit per chip since Sony would have shared some of the risk and upfront cost.

Consoles are razor thin margins. But some people just seem to refuse that statement and think its a golden cow for AMD.

 

[3DVagabond]

Consoles are razor thin margins. But some people just seem to refuse that statement and think its a golden cow for AMD.

Without knowing how much it costs to produce the chip we don't know what margins $60 is.

 

[VulgarDisplay]

Consoles are razor thin margins. But some people just seem to refuse that statement and think its a golden cow for AMD.

Who knows, maybe microsoft and sony pays $60 straight to AMD and then pay the foundry to make the chips?

Until the details of the whole thing emerge no one knows for sure. Some people apparently also refuse to believe the AMD can make any money selling these APU's to Sony and Microsoft.

Maybe one day unisef will get into the APU business, but until then amd are the people to see.

 

[Dark Shroud]

Consoles are razor thin margins. But some people just seem to refuse that statement and think its a golden cow for AMD.

And some people act as if AMD will be selling these chips at a lose.

AMD probably won't be making bank per chip, but it will be profitable. That is still years of stable cash flow between Sony & MS.

That's not counting the WiiU royalties since that will be small amounts. And who knows about the Steam Box situation.

Not to mention the possibility of game engines being optimized to use AMD HSA.

 

[itsmydamnation]

I don't know /\

Sony could have invested money, which AMD is short on. It's a custom APU, not like what they've been making it has a DDR5 memory controller and a shared memory pool.

I just thought I read somewhere they did, doesn't really matter just something that was in my brain. $60 still strikes me as grossly under priced, perhaps that's the profit side of it.

You know its looking more and more likely Kaveri is going to be GDDR5. All AMD APUs have "shared memory pools" and GDDR5 actually isn't that different from DDR3. The structure of the memory is the same, the latencies are the same, the way you transfer data and control that transfer is different. The only things of note worthyness that are "custom" in the APU is audio and decompression units.

diesize would be somewhere around 250mm ( pitcan - 2 CU + 2 jaguar CU's and north/south bridge). AMD sell a A8-5500 which would be around the same die size for around $100 USD so $60 does seem low. I picked the 5500 because its the middle of the product stack, models below are more about cost recovery and models above about more margin.

 

[Keysplayr]

Consoles are razor thin margins. But some people just seem to refuse that statement and think its a golden cow for AMD.

They want, or closer to the fact, need to have the hope that this is true. Let them. Doesn't hurt anyone. Makes them happy. No harm no foul.

 

[ShintaiDK]

Who knows, maybe microsoft and sony pays $60 straight to AMD and then pay the foundry to make the chips?

Until the details of the whole thing emerge no one knows for sure. Some people apparently also refuse to believe the AMD can make any money selling these APU's to Sony and Microsoft.

Maybe one day unisef will get into the APU business, but until then amd are the people to see.

Its quite certain its Sony/MS buying from AMD that then orders at foundry.

I dont think anyone refutes that AMD doesnt make money, because they do. The issue is what time period the ROI is and what the margins are. And we know the profit on console parts is very small.

They are also in a segment where you need to invest massively in future products. So if they dont have the money until say over 5 years instead of 2. That leaves a huge gap investment wise that they need to make this year and the next. Yet hurting the income even more. Not to mention the resources needed to develop this custom chip. Thats people taken from somewhere else.

 

[sontin]

I don't think that R&D is a problem. What they sold to Sony and Microsoft is standard. They had the APUs already.

On the other hand that the reason why Sony and Microsoft chose them. Cheap R&D results in low license payment.

I think around $50 of the $60 are pure production costs.

 

[Imouto]

AMD is making this chip instead of having its foundry channels idle and paying them to stay that way.

Poor business for AMD.

Yeah, sure thing.

 

[sontin]

Yes, it's a great deal for GF and/or TSMC.